A general resource for employees and management alike, covering issues old and new in the law of Ontario employment relationships.

Friday, June 13, 2014

Ontario Election After-Action Report: Where Hudak Went Wrong

In this election, we had a governing party ripe for removal: Scandal-plagued, with record deficits, and lacking a plausible plan to get the Province's finances back in order. This election was the Tories' to lose.

And they did lose. Badly.

How?

Notwithstanding a number of campaign fumbles, the problem with the Hudak PCs ran quite a bit deeper. Fundamentally, the issue is that, like pre-2004 Stephen Harper, Tim Hudak's policies targeted a niche group on the far right of the political spectrum, and failed to appeal to the mainstream electorate and, in particular, the centre swing.

Even beyond that, though, the Hudak Tories made a number of serious political miscalculations, running back to the days immediately following the last election.

A Crowded Left

It is well-known that the ballots in the 2011 election had barely been counted when Tim Hudak started demanding another election. Right from the time the government introduced the 2012 budget, he made it very clear that there was absolutely no way he was going to support a Liberal budget. From that point on, the ball was in NDP leader Andrea Horwath's court: She had the power, at any time, to force an election, and that power meant that she could exert very significant pressure on the Liberals. The result is that the 2012 and 2013 budgets were both very 'progressive' - the kind of high-spending budgets one might expect from an NDP government. Likewise, the budget Wynne introduced in 2014 might as well have been an NDP budget.

This was not an accidental result of Hudak's refusal to negotiate. It was foreseeable, and it was almost certainly foreseen. Hudak hoped that he would come off as the good guy standing by his principles while the other parties colluded to stay in power, and that he would be able to paint the Liberals and NDP as indistinguishable from each other. The Conservatives' best chance of winning an election - and especially of winning a majority government - has always been through a Liberal/NDP split vote among the left and centre-left. Hudak hoped to exacerbate this split by forcing Wynne over to the left side of the spectrum, leaving the entire centre and right to the PCs.

It appears to have backfired. If anything, the Liberals ended up with a more favourable split in this election than in 2011. (Indeed, their percentage of the popular vote is only slightly higher than 2011, yet they took several more seats.) This may be, in part, a result of having more appeal to the centre-left. However, it is likely that strategic voting had a major impact, as well, with Wynne effectively pushing for votes from NDP supporters to stave off a possible Hudak win.

It is possible, though I'm not sure I'm quite cynical to believe, that by forcing the government to seek NDP assistance, Hudak actually intended the government to engage in fiscally irresponsible behaviour - creating a fiscal crisis to drive Ontarians to demand a fiscally responsible alternative, so that he could ride in and save the day. Whether or not that was the intention, many of us in the centre realized that this would be the consequence of Hudak's intransigence, and it did not endear him in our eyes. Not to mention that he also lost marks in the "Plays well with others" column.

An Empty Centre

Despite having forced Wynne out of the centre and into the left, Hudak maintained and even deepened his commitment to "Tea Party"-style policies, floating trial balloons such as 'right to work' and privatizing Ontario's moneymaking Crown corporations, and running on a platform built on corporate tax cuts, sweeping spending cuts, and across-the-board de-regulation.

Of the three mainstream parties, two were pretty far into the left, and the other was very far into the right. The centre - where I daresay most Ontarians live - was completely devoid of options.

The PCs had a great opportunity in this election. Had they campaigned to the centre, with a more moderate style of conservatism, they would have absolutely cleaned up. No question.

Instead, they gambled that the Wynne Liberals would be so unpalatable to Ontarians, in light of the fiscal situation and their history of scandals, that Ontarians wouldn't have a choice but to endorse Hudak's policies.

They were wrong.

Credibility Problems on the Right

There are certain assumptions held at the far right of the political spectrum, which are provably wrong, yet to a small and insular subset of the population, self-evident in their truth. A classic example of this is the belief that you can make communities safer by punishing criminals more harshly - simply not true, as has been quite thoroughly established through the work of prominent criminologists such as Anthony Doob and Cheryl Webster. Another great example is the belief, held almost religiously among U.S. Republicans, that tax cuts universally improve government revenues. If that were true, then a government would rake it in with a tax rate of zero...obviously false. Within fixed limits, tax cuts can lead to an enhanced tax base over time, but the Laffer curve - used to justify tax cuts under the Reagan administration - necessarily implies that there is also a tax level at which tax increases will improve government revenues, and the empirical evidence would suggest that that level is actually much higher than believed during the 80s.

The assumption that corporate tax cuts create jobs is a distant cousin to that Reaganomic assumption, and is just as untrue. Ontario already has one of the lowest corporate tax rates on the continent, and the consequences are clear: Corporations are hoarding the cash, not spending it on growth initiatives, not using it to create jobs. (There's a logic to this, too. Growth spending and payroll is generally tax deductible. Tax cuts will not incent tax-deductible behaviour; it will incent non-deductible behaviour, like retained earnings.)

Then there are the promised job eliminations and sweeping cuts.

Before I go on, let me tell you a bit about my background: I was raised in a fiscally conservative household, with the belief that almost all debt is bad, that individuals and businesses should live within their means, not spend money they don't have, and that government should act like a prudent family or business.

I still hold to the belief that personal debt - outside of secured debts such as mortgages and car loans - are to be avoided if at all possible. But my understanding of the nature of debt - for businesses and government - was shaken up when I got to university and took Economics 102 with Professor Larry Smith, who explained how and why many corporations operate in perpetual debt, and why this is a very lucrative way of doing business.

When dealing with governments, it's a bit more complicated, and brings in considerations of Keynesian economics: After the stock market crash of 1929, governments around the world did what all smart families did, and tightened their belts. Less spending, fewer public servants, fewer government contracts. This response exacerbated existing problems by further increasing unemployment and making it harder for businesses to survive, and the situation quickly exploded into what we know as the Great Depression. Keynes argued that, instead of tightening their belts, governments should borrow and spend - what we now call 'stimulus' spending. This way, we keep our economic infrastructure in place, we are able to employ people at a time when jobs are scarce, and we send our public servants out into the market with money to spend. Then, once the economy is back on its feet, we scale back public spending again. (That last part is too often missed by left-wing governments, sadly.)

Right now, our unemployment rate is still high; our economy still fragile. Eliminating 100,000 jobs from the public service, as Hudak promised, would be more than the private sector could absorb right now, and would have the impact of increasing our unemployment rate, potentially sending us back into recession.

To be clear, the policy questions as to whether or not we need those jobs are another matter. I'm also not satisfied that it is prudent to cut the number of teachers Hudak would, from the perspective of education quality. But looking at it from strictly an economic recovery and job creation perspective, which was at the centre of Hudak's platform, it was a ridiculous promise.

So what we have here is a pair of well-meaning policy items which would not only be ineffective at their stated goals, but would actually be counterproductive to the job creation Hudak promised. It might persuade the Tea Party supporters, but to the rest of us in the centre, this was alarming. Hudak's trying to sell his economics degree, yet he's making promises that suggest a complete lack of familiarity with contemporary economic practices.

His infamous calculation errors are the tip of the iceberg. Counting 'person-years of employment' as full-time permanent jobs is simply a silly mistake. Accepting his own assumptions as true (which, as I have suggested above, most people don't), his policies would have created approximately 75,000 jobs over 8 years - less than the 100,000 he planned to axe from the public service. And, perhaps worse, even after these miscalculations came to light, he still stood by his numbers - probably because he had so deeply branded his campaign with that policy - the "million jobs plan" - that he couldn't back off of it.

Thus, for those Ontarians looking for a better option in terms of economic and fiscal policy - an area in which Wynne and Horwath failed to pass muster - Hudak simply failed to present himself as possessing the competence to properly guide Ontario's economy.

What's Next for the Ontario Progressive Conservatives?

My worst fear is that the far right members of the party continue to control the party's dialogue, despite this crushing defeat, and choose to attribute Hudak's loss to something other than his policies. His personality and leadership weren't altogether terrible, he performed quite well in the debate, and his opponents were heavily compromised, but his policies made him completely unelectable in Ontario. If we want to restore a healthy dialogue to Ontario politics, and give ourselves more meaningful options moving forward, it will be by the PCs finding a leader who is closer to the centre of the spectrum, who advocates fiscal restraint in a more moderate way.